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tv   Squawk on the Street  CNBC  September 17, 2013 9:00am-12:01pm EDT

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this country but i believe in personal responsibility and we have to get back on the right track here. follow me @scottmcnealy at twitter and can go to chairmanmcnealy.com. >> join us for box bach tomorrow. "squawk on the street" begins now. >> good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with david faber. a fair amount of news this morning as we await the fed decision tomorrow. the 10-year yield around 2.84 this morning. folks continue to guess about
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potential successors to ben bernanke. stocks nearing some record levels. the nasdaq moved toward their best september in three years. >> apple is not part of the rally. the company announcing the new 5c and 5s will be available friday. we'll talk about whether investors should be concerned. >> look out elon musk. they are working on a new electric car. >> first up, fed reserve policy makers begin a two-day meeting today. the fed statement will be out tomorrow followed by a new conference with fed chairman bernanke of course. it comes one day after stocks did rally on news that former treasury secretary larry summers pulled out of the running for the fed chairman. everyone is talking about yellen, though you look at andrews' column in the time today, the mention of donald
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cone, geithner still gets a mention here and there. >> geithner's out. but i think that ferguson will be terrific. >> look, i still believe that if you liked summers, you don't like yellen. sure yellen was a popular favorite but the whole time that the president wanted summers yellen was a popular favorite. what's changed? he clearly doesn't want yellen. maybe he accedes to the senate? >> morgan stanley says the longer the president delays, the easy choice, meaning yellen. the more clearly he shows his reluctance to do so. >> he had an opportunity yesterday to say let's clear this out. the president said, look, the republicans don't want to play ball. i think the president laid out the shutdown case pretty clearly. he's obviously in a very combati combative mood other than wanting the republicans to shut down. i see taper, i see shutdown as a
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larger issue. >> it hasn't risen to a level of great concern for investors. john was at 25% if i recall. >> the president wants a fight. >> what would your fight be? >> 50/50? >> 60%? >> no, i'm talking about the amount of wrangling -- >> the lesson from last year was don't believe any of it and hold on because then we're going to have a huge rally -- >> doesn't mention 2011. by the way, the president is a chartist, not a fundamentalist. the president does not care about the stock market. have you seen anything that indicates that he cares about the wealth that's generated, 401(k)s. the previous president wanted to privatize social security. that was not a great call. >> let's stop that conversation right there. microsoft boosting the dividend 22%, a new $40 billion buyback. >> stock's up. hello. is this value act beginning to
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flex their muscle? >> and/or other shareholders. i think there was a shareholder base that was very unhappy with the nokia deal. you heard of value act and what they were able to accomplish with obviously an incredibly small percentage of the outstanding shares. but they were very unhappy with the nokia deal, they're a large shareholder. >> this is new. how did you -- >> it is a 40 billion -- it replaces the previous 40 billion. >> cap re is renowned as being smart and not adversarial. >> right. i don't know that they would be publicly adversarial at all. there's a lot of unrest within the shareholder ranks. i want to read the release here as well because i want to find out what's being released and what's being increased. >> dividend boost is substantial. >> 28 cents a share now, right?
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>> payable december 12 to shareholders of record november 21st. by the way, quote, amy hood, the new cfo, who is taking a pair of fresh eyes to the balance sheet, jim. >> microsoft as opposed to apple is doing everything. some of it's not working that well. but i think they want the stock higher so bad. this isn't malcolm x. >> before the analyst meeting on thursday. you had a restructuring announced, though no cost savings non savings announced with it, you had ballmer announce his retirement, you had a deal almost wholely rejected by stockholders, the nokia deal, you're now a device maker. you're doing more on the share repurchase front, continuing,
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raising the dividend. >> it's a quandary to me. it's a desperate company that doesn't need to be desperate. >> you think it's flailing as opposed to stra teejic? >> i don't know. david interjected something that i met the cap re guys in the early 1980s. if the cap re guys are unhappy, you did wrong. okay? maybe the biggest rigorous outfit there is. if they're unhappy, you respond to them. they're great. >> it does sort of raise the conversation about the thesis some have going into the fourth quarter and that is we are in for a string of big cap div hikes as they try to keep pace with the rising 10-year yield. >> i think you've got to. i'm looking for some of the drug companies to do the same thing. we're seeing companies do things to get their stock price up. huntsman announced a very
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important deal, a whitener, they're buying a lot of stock. tungston, this was a deal. these companies are not stopping. boise. that action which signatures was inkr -- that acquisition was incredible. these companies are saying we are mad as hell about our stock prices and we're not going to take it anymore. activism. >> activism is a key theme. it has led to different outcomes. >> barrack. >> let's not make too much of it. there was a dividend increase of significance but, carl, just to make that point, it's not as though they're instituting a new repurchase plan. >> someone who knows the company well, john ford, joins us.
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your thoughts and maybe some reflection on what's behind this move. >> sure, carl. i'm sure you guys have already mentioned value act and all of the rumblings are activism in tech, carl icahn out of dell but still paying attention to apple and david wisely just mentioned this 40 billion was a continuation of what was expiring. you've got to raise the question of growth in large cap tech. you think about microsoft used to be seen as the gift that keeps on giving growthwise. now it's got big questions. it's got the surface event coming up next monday and everybody is saying microsoft hardware thus far is pretty much a dud. it's looking to purchase nokia's devices and services business to spark growth there. look at cisco, look at ibm, look at apple not coming out with preorder numbers for the 5c. lots of questions where these
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companies have been successful in eras past, where they go from here. in a way you can't look at this dividend increase krowithout thinking about what else are they going to do with the cash. >> if will lead some to wonder if and when they will start to leverage the offshore cash. >> they have to split the company up. this nokia deal, the market has spoken. nokia keeps going higher. microsoft doing nothing. i'm hoping value act and cap re -- >> can you do that as a lame duck? aren't you locker your successor out of options? that's what the complaint was about the nokia deal. >> that's a good point. i don't know. i think that ballmer doesn't want his legacy to be a $33 stock. >> in the case of value, they
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signed a confidentiality agreement, you're not going to see public oofring there. >> why don't they just get rid of the stock? they say we got this one wrong, let's just move on. like, hey, this was a bad buy. one of the things these activists, i love them. i used to be a head fund manager. it would be like, no, we got it wrong. no, no! let's start making noise, we can make it right. what the heck is going on, value act? and then management listens to them? why doesn't management tell them to hit the road? >> if management thinks they're speaking for a larger base, they'll listen. even some activists take different approaches in different situations. sometimes they'll be tough, other times they'll try to work with management. >> look at aerpostale and
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sycamore. what kind of fight are we in on that? >> i don't know. have they been to any of their stores? sycamore. maybe go in and great lot of nfl tickets this weekend. >> carl icahn is going to have his dinner with tim cook one of these days, which leads us to apple shares, which are falling in the premarket. in a is one day after they closed at what was the lowest level, i believe, since july 29th, the company issuing a release saying the iphone 5s and 5c at 8 a.m. local apple retail stores, 12:01 pacific time online. mean next week we get more details on preorders.
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they got a lot of phones. they're ready. it's not going to be the same problem with the first roll out. >> i got some ideas on that dinner. order in chinese. >> icahn is a money saver. you think he's going to say, listen, let's go splurge? no, he's going to order in, get some work done. >> i'm sure tim cook is buying. >> maybe that bacon cheeseburger that peltz did with the pretzel roll. don't laugh. that moved the stock from 7/8 to 3/8. >> we have a new ad for the iphone. take a listen. ♪ ♪
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♪ ring, ring, tell you about the new trends ♪ >> interestingly, guys. even though apple has taken some knocks on the way back to 450, a highly watched survey called asci, apple crushes every pc maker, 87% customer satisfaction, dell's at 79, hp is at 80. ties for their best score ever. >> someone was on twitter yesterday saying why aren't you more excited about apple? i'm an apple family. it's about cheaper phones in china, it's about samsung, it's about lower prices, it's about
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maintaining margins. the products are the best. i look at that ad and i'm thinking i'll go buy something. it's not about that. >> you said it. it's about new products. we'll probably get some sort of an ipad announcement before the end of the year. nothing new. >> i'll get it. i'll get it. i'll watch it. >> there is no expectation as this year now enters almost the fourth quarter that we're going to get some unexpected announcement. and these product announcements are always anticlimactianticlim. they offer stock. does that hurt their ability to get new clients? >> i think the guys used to go to goldman sachs are going to twit per. >> b-- twitter.
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>> but do they not go to apple? >> when we come back, boeing's next boeing 787 dreamliner is set to debut. a little weakness off of some europe weakness. two-day fed meeting begins. and we'll talk more about the microsoft div in just a moment. [ music transitions to rock ] make it happen with the all-new fidelity active trader pro. it's one more innovative reason serious investors are choosing fidelity. get 200 free trades when you open an account.
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take a look at microsoft.
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just got a 22% div hike making some waves. people beginning to wonder maybe there are further moves in the balance sheet to come. we'll find out. also a $40 billion buyback to replace the $40 billion one that expires at the end of the month. meantime, general motors planning to take on tesla with a luxury electric car of its own, developing a car that can go 200 miles. they didn't say when the car will be available. some discussion on whether they want to improve the volt or create a product that competes more with tesla. >> good luck. bmw introduced a product and they can't touch tesla. i think gm is a terrific stock but those who buy it for this are mistaken. buy it for the gasoline models
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that everybody wants to be renewable. earnings matter. gm's got 'em. >> there does seem to be a great deal of advancement that needs to take place in terms of battery technology. i don't know if tesla is further ahead of making a battery more economically or not but that seems to be where the focus is. >> we're going to have a cheaper iteration. when i drove the tesla, it's very easy to fill up so to speak, but you have -- it's the distance between. >> and you get to a mass market car that goes 250 on a charge that they make a battery for that is not $14,000. >> you have to be able to pull into the vince lombardi stop at i-95 and get a soda at mcdonald's and come back and your car be charged. that's my dream come true. that's my dream.
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>> make it happen. you've made so many of your dreams happen. make it happen. >> give me an extension cord, i'll wrap it around your neck. >> it's interesting that gm is eyeing the model s area. even on recent calls, musk talked about a car called the gen-3. >> when we had them on the show. he is really focused on making the tesla a mask car. it's similar to when henry ford said we're going to make a car for everybody, a model a for everybody. tesla wants to bring down the cost and they can really ramp up production. henry ford comes with a lot of illogical baggage. >> you said before you don't get in the way of a cult stock. at this point your thoughts on tsla are -- >> it could still go higher.
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i did a piece last night on netflix saying netflix can go higher. >> even after a couple of downgrades last week. >> breaking bad is like walking dead where you literally need to get in it. you heard les moonves talk about how he needs netflix in order to be able to have those -- >> more than he needs outer wall. >> incredible. my advice to outer wall is kind of mohamed ali. you can run from being red box but you can't hide from weaker earnings. >> when we come back, the head start you need as we count down to the opening bell. futures hanging in there, mildly positive after that 118 gain yesterday. a lot more "squawk on the street" from the nyse straight ahead.
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♪ ♪ about five and a half minutes before the opening bell. time for cramer's "mad dash." we just got some news on safeway. the company put a poison pill in place. it triggers when an acquirer gets to 10% or an institution gets to 15%. what interesting in the release is they say they've become aware
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of an accumulation of the significant amount of the common stock of the company. now, i can recall when air products did this and i told you it was ackman -- we haven't heard from him in terms of a proxy, i think the window opens the 20th of september the i can't tell how it is, what it is, i can just say poison pill. >> we focused last september on credit suisse going from a sell to a buy. they talked about how the company was troubled and they had to bring up trouble. i've been waiting for this company to catch up with the industry. >> now there's consolidation. private equity used to like these things, whether it was -- >> but this used to be private. they already did it. so this is not their first rodeo. >> that's right. >> but i do think it's worth a great deal, underappreciated company, new ceo.
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you know what, this one is worth -- geez, it's bad. >> the stock is moving as we're talking here. but the news itself, they do say an accumulation of a significant amount of common stock they're aware of. >> this is an amazing time. every tom, dick and harry hedge fund and they react. another one that didn't say go take a hike. >> we have that opening bell four minutes away. today tapering and transitioning at the fed. two former fed governors two former f♪ governors
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it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. ♪ you're watching cnbc "squawk on the street," live from the financial capital of the world. the opening bell set to ring in about a minute's time. some news today, a lot of upgrades, some coming from jpmorgan. we haven't mentioned the airlines yet. >> extraordinary. this is about u.s. airways. tharp s they're saying 50/50 chance.
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us airways would be up substantially. >> the government wanted a trial well into next year and usair -- they got the trial a lot sooner. [ bell ringing ] >> there's the opening bell. down he their at the big board. celebrating the premiere of "hostages." >> if that's the school in philadelphia, i couldn't afford that. >> speaking of retail, did you know there were 99 days until christmas. >> right after labor day you have to put your orders in or
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you're not going to get your stuff in time for christmas. >> shopper track has a forecast for november/december. they see holiday up 2.4 year over year, below last year's 3%. they see traffic being negative year own year, hopefully made up by larger transactions. >> i have limited ksh i had express, which is off limited. they're saying there's still great traffic in the highest end malls but express has hit on the idea that there's a lot of downturn in other malls. sears -- >> baker street put a release a couple of weeks ago. you've got a very small flows in your comparisons are not quite
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right and you're not accounting for some of the negative things. we had bruce berkowicz on and he was talking about still seeing real value in the real estate. okay. it's ban long time now. >> i want to clarify my comments about netflix. these are short squeezes, tesla, sears. there are some very rigorous hedge funds did work, thought they were radically overvalued and the public came in and bought the heck out of tesla and -- sears is kind of like herbalife -- >> it's hedge funds versus hedge fund. don't you think? >> yes, it is a gang up. >> metric warfare. >> make akron should go to are hedge fund and say this isn't a fair price. >> he started it.
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so far he's brought a knife to a heart attack fight. >> that's a quote from a bad piece. >> that can't work out well. >> we keep mentioning secondary it seems pandora is off 10 million shares. >> some guy who was trying to gain linked in was saying to me you're so wrong to say that linked in was -- no one is angry at linked in and the more as ashs -- i think the same thing happens with pandora. pandora is another company that should have been bought by apple, along with netflix and sprint and directv and cbs. that way you own the home. >> apple should have bought cbs,
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directv, sprint, netflix -- >> and sears? >> not sears. that's interesting. that way they would own the living room. people want to know what would make me excited about apple? they would do the grand plan to have the living room, have their own network, have their own -- >> we would have sat there every time and said what are they thinking? >> they're going with my game plan. >> jpmorgan does cut some of the foot sectors. they say they're not favoring any name tethered to dividend deals. >> i was thinking con ag ra blows it out. that took my breath away. that said the number one guy in the industry is faltering. that consumer package good stocks are just not right here.
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people don't want to own them. kol oog is a reformulated good company. the only one that has hung in was procter & gamble, above 80 still. but i was shocked at that. that was kellogg to a sell? battle creek, michigan and you put them to a sell? that's not right. >> that's wrong? >> that's wrong! >> they do have names they like, pand lien i keep thinking about delivering alpha conference, making fun of the name mondolease. the company has underperformed. >> when he takes to a public forum like that -- >> you say it's late in the game. >> right. the strategy he typically has is not really working that well, which is to keep things out of the public retle and then you
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have manager. one of the things you have to watch with dupont, there a big tight tanium deoxide. >> shares were up over 9%, news of an accumulation of a significant amount of stock the company became aware of, puts a poison pill in, will trigger at 10%. they've talked about all the things they've recently done in trying to create value, putting the canadian assets and it will maximize the long-term value of the company for all shareholders. these stock watch mechanisms have gotten very, very sophisticated.
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air products knew it was ackman, right? they had a pretty good feel on that. i don't know what safeway knows or doesn't know about a potential activist or another significant shareholder that may be planning something but interesting to know o. >> yes, they do. >> they pay for that? >> there are firms who offer the service of telling you who is in your shares, what your share base looks like. they will do some investigation -- >> is that right? why are they allowed to give your name out? >> they can try and figure out. it's best guesses. they don't know 100%. >> people have to understand, it's very secretive who buys your stock. >> that's why stock watch exists. >> very interesting. >> we'll talk to rick sherrlynn
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in about half huh hour. >> let's get to bob pisani. >> i'm pretty impressed with a 22% dividend boost. the microsoft stock has been jumping all over the place. but 22% is pretty good. 3.3% roughly, put up the full screen. that's what pfizer is playing, clorox, kimberly clark. heck, they've joined that rare group of tech stocks that pay dividend yields about 3%. microsoft has joined that particular group. by the way, more importantly we're seeing some real interesting moves here in some of the other groups here, we're seeing the s&p 500 here. a lot of these stocks have been doing very well recently.
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83% of companies are now paying a dividend in the s&p 500 and the payout ratio at 31.8%, it's the tiest in the last several years since mid 202010. looks and the timing is not accidental. microsoft have having an analyst meeting on thursday. i'm sure there will be talk about moving everything, the cloud and nokia. the question is innovation in the company, not just the growth products for windows. jpmorgan upgraded, us air upgraded. everybody in the world is having trouble raising price. not the airlines. revenue per available set mile is going up here. also, we're seeing evidence that oil prices are peaking. that's been helping them set as
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well. nobody is spending any money. all the money sitting in the banks, 1.7 trillion in reserves just sitting there because either nobody wants to borrow money or because those who do want to borrow it don't have the credit to do so. let's hope that changes a little. i'd gladly deal with a little higher influence to. >> cramer, i want to talk about the media stocks. i know you've been watching them. >> they're the best group in the world! >> take a look at these stocks. i just came in this morning as i typically do, take a look at some of the charts and make calls and watching cbs and viacom, not to mention time warner and fox, look at them
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versus the s&p. >> that's media and -- >> maybe we didn't want to be a homer this time. >> thanks a lot, carl. i'll be seeing you. it's nice to know both of you, i enjoyed the show. >> you'll be buying a tesla. >> this is buybacks. it's more than that. we have talked so often about how they have massively reduced their share counts, the incredible ability to generate feed cash flow at these companies. by the way, where's disney? sorry, i meant to include that one, along with potentially comcast. the buybacks, disney last week had one of its best weeks given that buyback. let's move through some of the stocks so you can see that. >> wow! >> it's more than that. it seems to also be about global
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growth, deet sire a growth, the desire and need for international content, the fact that people want to watch our television and content. cbs, 52-week high. les moonves may become a billion may -- billionaire given all the stock he owns. sumner, he's never been richer. i wanted to mention this idea of foreign -- the appetite for our product in foreign markets. take a look at lgf. have you looked at lionsgate? >> that was at 16 when the first "hunger games" came out. >> carl icahn sold it at 6. i think it was 6. and it's hovering near all-time highs. they do make "mad men" and "breaking bad," though i don't
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know how much money they make from them. it's incredible. that's a pure play. >> did you hear that best ratings in the show, i could not get to sleep after that. >> i mean, they have midas touch. >> we thought that cord cutting over the top would be the demise of a lot of these things, disney, the breakup of. bundle. but none of those fierce have be -- fears have been realized. >> let's go to rick santelli. >> yesterday is very difficult to try to handicap. a lot of pressure on traders in a short period of time with the summers issue surfacing. you can see what happened yesterday and hough yiew yields
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moved up just a bit. look at the two-day at 10s. their drop was much less. they are coming back a bit. the significant portion of the technical analysis here is to move the charts back to july. the very lift that foot, that first significant high, we talked about it when we were in the sight of week -- two day of and the same could be said for the gilts in the u.k. the dollar index has its own set of issues above and beyond the fed. it's drifting lower. open that chart up to august 1st and you can clearly see how it's deteriorating. hey, what day is it, mikey? i'll tell what you day it is. for all the rest of the country around here, it's blackhawks day! they'll have captain jonathan
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toews to do bell ringing. >> what are you talking about kelly? >> billionaires. keep this in mind. if president obama, who back in july has had a lot of his domestic agenda overshadowed by foreign policy to crisis here at home, but if he's concerned about the wealth gap in this country, a well cited berkeley industry talking about how 95% of income gains going to the top 1% in the country. these are not the headlines obama wants his legacy to be defined by. it may help explain a little bit of the andimosityanimosity.
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you can say it's unfair to blame the fed with the wealth gap. nevertheless, if you're president and you can't get any of your legislative agenda through congress, perhaps you look at all of the openings in the fed and see an opportunity there to cast your policy there in a different direction toward helping the middle class. if that's the case and is president is looking at a policy that won't make him president and successful of the 1%, does that change the type of person he might be looking for? >> the s&p tells me under the president is up 110%, that's within a stone's throw of reagan's 117. >> over the same time period?
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>> over reagan's two terms. >> he always said let it be known he thinks the stock market is for rich people. >> it is the bernanke put out of the market here. the whole formula might be changing. >> thanks, kel. >> yup. >> when we come back, cramer goes primetime. which question he asked last night on nbc's "million second quiz." a lot more ""squawk on the street" in just a moment.
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getting some news on the jpmorgan london whale case. kate kelly. >> first of all, the lawyer representing the junior trader who was indicted last night for allegedly mismarking some of the positions on jpmorgan's books that led to $6 million in losses has come out swinging. he said the justice department investigation of jpmorgan in general and his client
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specifically is highly politicized. he said there's tremendous pressure on the justice department to bring a case against jpmorgan and finds it incredible that the london whale, himself, who was allegedly the master mind of the credit trade that got jpmorgan into trouble with losses has essentially been given a deal with the government and let off the hook. he said it's an attempt for the government to settle its highly politicized settlement. on that notion, last night we got word that jpmorgan is close to settlements with multiple regulators over essentially having shoddy controls in connection with this and the tab for the london whale losses and regulatory fines is looming to $7 billion and higher. jamie dimon has said enhancing the company's controls is the number one priority. he know as number of measures have been taken to beef up jpmorgan's compliance in terms of staffing, expense and overall
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sort of self-awareness and self-criticism in the wake of some of these issues. >> kate, the "times" this morning talks about the possibility of an admission of wrong doing. they call it something that would be a rare stain on their reputation and something that could open them up to some private litigation down the road. your thoughts on that? >> i think that was already baked in, carl, only because jpmorgan itself acknowledged eventually in great detail the jpmorgan losses and took responsibility for it. i believe jpmorgan said words to the effect of this is the most dumbest thing, most badly handled i've always been aparted. they've already subjected to a number of lawsuits. i would agree. i think we will see an admission of wrong doing in connection with these settlements and the
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s.e.c. chairman shade this is a priority. >> this is still a year and a half old. they didn't go after dimon. they could have gone after dimon. they could have said, listen, he knew. but they're giving him a pass. >> a pass? they're coming after jpm on all sorts of things. it's their time. >> thanks to kate cramer's "six in 60" after the break. nascar is ab.out excitement but tracking all the action and hearing everything from our marketing partners, the media and millions
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from the host of cnbc's "mad money," here's jim cramer. >> valued at $280 million, who does forbes magazine say is the wealthiest hip hop artist? >> almost $190,000 on the line right here. sarah, what did you answer with? >> c, jay-z. >> devon? >> c, jay-z. >> is that right? >> no. >> sean diddy combs. >> a lot of people thought 50 cent because he gave the money to goldman. >> that was jim by the way. did you have fun? >> yeah, it was great. i got to tell you, this is a big
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hit show. very tense. very tense. no one even knows the questions. no one. you have to do your own camera crew and stuff for them. top secret. >> let's go to the "six in 60." >> stratus hit a big secondary. >> this is davidson saying $2 billion tender offer coming at 75. it's accretive. >> this is a company that's been biding time because it's a mortgage insurer. fha pulling out of that business, buy it. >> apache? >> everyone loves the egypt deal. apache goes higher. >> whole foods? >> they have really come after safeway. whole foods goes much higher. >> jpmorgan. >> i can't believe it. jpmorgan says this deal could go through. airlines would go up
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welcome back to "squawk on the street." home builder sentiment was unchanged in september after a one-point downward revision. the survey now stands at 58, right along with expectations. it was at 40 just one year ago. 50 is the line between positive and negative. the reading still the highest in eight years. the home builders blame the, quote, sharp increase in mortgage rates for the pause in builder confidence. they say consumers are waiting to see where rates settle. at average year on the 30-year fixed conforming loan hit 4.80% last week up from 4.37.
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shrinking supplies for lot development and increasing labor costs. while there is a low inventory of houses for sale, housing vacancy rates are still well above historical norms as many young americans are still facing a tough job market and still living at home with their parents. current sales conditions remain unchanged, futures sales expectations fell three points and buyer traffic increased one point. sentiment rose across the nation but was the strongest in the midwest and west, rising 4 points in each. sentiment gains were more moderate in the northeast and south. simon? >> on the back of that, the s&p 500 is inching toward its all-time highs, up for the tenth time in 11 days. the question is account rally contin continue? let's ask david joy and peter
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sorentino. >> good morning. >> are you surprised about the sentiment here? and what do you think it means for the broader economy? >> i'm not surprised. the number was right on the consensus. it seems as though after a lull in the spring, early summer housing sentiment has rebounded. so this was expected. mortgage rates are up, as you point out. but they're still low historically. and so i'm not too surprise by it. i think it's encouraging. >> 4.8%, as diana said, the average mortgage rate is heading back toward that 5% level. we've seen a huge decline in refinancing activity, a ton of layoffs at the banks and some are having to revise what they think they're going to earn in the third quarter because of that. how much of a tell is this really in terms of how the housing market is holding up more broadly? >> this is one of our fears. we've not seen disposable income
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keeping pace with what we saw was an increase in consumer spending. there was a little levering going up. with the structural changes in the job market, our fear is that sector of the economy will start to run into -- maybe not a big selloff but we'll see some softness. once housing begins to plateau, it's not long after we see car sales and everything else tape are down. we think that story has played out here so we're pretty cautious on the whole consumer sector as a result. >> i'll bring up taper because you just mentioned it in a slightly different context. the for here, if -- the federal reserve here, if they pull back their horns here, should they just leave it alone and back off? >> we need a return to a healthy bond market. we've got a lot of corporate financing going on. so i think some of this, you
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know, may serve to push rates higher, the bik verizon -- big verizon deal coming out. how much do they taper? what does that telegraph to the fixed income market? our concern is we are going to see interest rates continue to climb. the fed will try to gracefully exit and let this market get back to a normal supply/demand dynamic. >> david, i'm surprised you're as upbeat as you are about housing at the moment. goldman has to figure out the average monthly cost of a mortgage being $110. two things. it occurs to me, david, as we go into the meeting is they have two problems, one is that housing may wobble and the other is they'll have to forecast
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their 2016 for a the first time and showing that the economy has kind of mobilized and they're going to have to keep hillson low. they're going to be very dovish tomorrow. it's going to be a super light taper, perhaps even $10 billion and a lot of talk about holding interest rates down for longer. would you buy it? >> yes, i would. i think the economic data has been ambiguous enough to almost anything. but i think the market is prepared for a taper and i think they're going to start to do it. the other thing is, depending on how the economy performs, they said they want to get this done and there are only six more meetings before the middle of next year. they have to get this program under way, i believe. having said that, don't overlook the demographic forces that are at work in the housing market. the housing family formations are increasing after being under
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pressure for five years, inventories are extremely tight, particularly in the northeast and midwest. and so that's an offset to this pressure on interest rates. and so i think that there is still some steam left in the housing market. >> we'll leave it there, gentlemen. david and peter, thank you very much for your time this morning. >> you're welcome. >> more breaking news here, the cbo is just releasing its long-term budget outlook. chief washington correspondent john harwood has all the details on that. john. >> reporter: simon, the long-term budget outlook we've just gotten from cbo confirms the trends that we had known were happening, and that is in the short term the deficit is coming down rapidly. the cbo projects it will be just 2% of gdp in 2015, one fifth the level it was in 2009 when it was about 10% of gdp.
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after that it begins to rise again as more and more baby boomers retire and go on medicare, medicaid and social security. what they show is, you still see debt held by the public goes to 108% of gdp, it's now 3w7 3% and dropping. but it's going to go up again. they showed that spending on federal health programs and social security will rise by 2038 to 14% of gdp. that is twice the level of the last -- the average for the last 40 years. so it shows very difficult situation, even with the moderation of health care costs that we've seen in recent year that cbo believes will continue for a while, a very healthy situation that indicates there is still structural reform needed on those federal health programs and a realignment of
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spending and revenue for the federal government. >> people thought we were making some head way. thank you for that, john harwood, in washington. >> microsoft boosting dividends by 22%, setting a new $40 billion buyback. jon fortt is live with that. >> microsoft announcing its quarterly dividend is going up 5 cents. that going to cost more than $140 million a quarter, which sounds daunting but they generate billions each quarter. the company announced a reorganization in july and announced ceo steve retire in a year and they have plans to buy nokia. microsoft's core windows business is flagging as people
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shift away from pcs and toward mobile devises. the main areas growing for microsoft, cloud and data center. don't expect much cheering from the sidelines. moves like this aren't long of -- david barnicle said he think as breakup is in order. he lowest estimates because he says we're less likely to see one, guys. analysts looking forward to that meeting in just a couple days, looking for bigger changes. >> speaking of analysts. for more on what microsoft's big div hike means, richard sherlund. >> good morning to you, carl. >> is it disappointing? is it that investors want more down the road? >> it increases the yield to
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3.4% from 2.8 p%. it's signaling more ongoing changes in corporate governance in microsoft. you've seen a board seat for activist value act. i think you're going to see more changes in the composition of the board and independent directors are starting to engain directly with shareholders. i think it's important in that is signals a change in worp prapt government. you've got a company that generates 25 to 30,000 a year in positive precash tlo. >> farce the breakup of the company, i don't think mcdonald's should break up fries from hamburgers and chicken mcnuggets. i don't think microsoft should
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break up tools. you could spin off your search business. new management may focus the business better, so i think there's a lot of good things that can happen in the company, particularly with the use of the cash that could be much more impactful to the stock than what we've seen today. >> rick, you've been talking about the story for a long time and directionally you have been correct but how much can happen if ballmer is a lame duck? >> i suspect it will take four to six months to find a successor. i think there's some very good candidates the street would be very excited about. i think there a couple steps we need to go through, management success first and then probably a change in the dividend policy that could be much bigger than what we've seen today and a much more aggressive share repurchase program and then see how we can focus the business better. you could probably have a lot more focus and drive eye haier
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ea -- higher earnings growth out of the business. >> if this is a step toward something more significant, you would think the shares would take this into consideration. right now they're struggling to say positive. why is there still some doubt that microsoft will deliver? >> well, i think the stock is, after the nokia news threw a bunch of cold water at the stock. you do have an analyst meeting come thursday. they're going to talk in a shift of that means lower margins and charges. you got to get through the analyst meeting and this nokia deal i think was a damper on sentiment. but the stock has really done a pretty good job off the bottom i think when the nokia news dampened expectations somewhat. >> doesn't the nokia deal say it
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all? it demonstrates despite all the things you said that they had to buy the one hand set maker that was using their mobile operating system for fear they can switch to android and they'd be hugely embarrassed? >> phones is a hard, uphill battle for microsoft and i thif nokia was threatening to do android phones so microsoft had to decide do they just want to get out of the phone business or double down at it? the street would rather have had doubling down. >> he may just being i do think it was an unfortunate decision. it probably was well under way for the past several months and the timing was just very awkward. >> rick, thanks so much for coming to the phone. we'll talk to you soon. >> ahead on the program we'll get the latest details on that
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tragic shooting in washington. plus, how it could affect security in your workplace. we'll be right back. arkets, a lot can happen in a second. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price -- maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. ♪ [ male announcer ] 1.21 gigawatts. today, that's easy. ge is revolutionizing power. supercharging turbines with advanced hardware and innovative software. using data predictively to help power entire cities. so the turbines of today... will power us all... into the future.
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are a normal part of growing up. not everyone can be a foster parent... but anyone can help a foster child. a sad day in washington today after a military veteran went on a shooting spree at the navy yard killing 12 people before being shot dead himself. eamon javers is live on the scene. good morning. >> reporter: good morning, carl. it a sad day, as you say. just a few moments ago we saw
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over near pennsylvania avenue at the navy memorial, the secretary of the navy, secretary of defense and other officials participating in a wreath laying in honor of those who died here yesterday. the tragedy happened just a hundred yards or so behind me, building 197 of the washington navy yard. we've got some new animation now from nbc news showing exactly what happened inside that building as the shoot owing kurd. the shooter, aaron alexis, was able to make his way into a cafeteria area, perched up on an atrium overlook and shoot down into the crowd in that cafeteria. folks in that area at 8:15 in the morning getting their morning breakfast just didn't have a chance to escape from the vantage point. that's where we're told he did most of the damage. during the chaos of yesterday we saw a whole section of the city locked down during portions of yesterday. the senate under lockdown at
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pieces of the day. we saw helicopters overhead with sharpshooters on the lookout potentially for two other suspects who were said to be possibly associated with this. that was not the case. the shooter was just one man and a man who had a history of psychological problems and gun violence incidents in his past. the big question here is going to be how did a guy with a history of paranoia, said to have been hearing voices in his head, to have sleep disorder, how was he able to get a clea e license? >> the government agency in charge of monitoring workplace security says there are 2 million victims of workplace
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violence a year, they tend to involve people who work with cash registers, people going to people's home, the cable guy, nurses. the ceo of diligent communications says most companies rely on government background checks but he says that's not enough and companies need to step that up. >> at least a third of their focus needs to be on hiring people that have clean backgrounds and records. you spend another third of your effort trying to make sure that the security protocols are reasonable and as you see yesterday, when something does get through, you want to have another third spentrotocerorotos protocols. >> why do you need response protocols? because many slip through the cracks. >> we're trying to predict human behavior. to this date even though we can suggest these flags should be looked at, we still can't
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accurately predict human behavior every time, especially in a case like this. >> what is the response protocol? it's pretty logical in this order. if you can, get out. if you can't, hide, under your desk, in a closet, turn off the lights and whatever you do, turn the ringer off the cell phone. the scariest but sometimes necessary option, grab anything that can be a weapon and fight back. it sounds logical, actually executing on that can be incredibly difficult and some suggest would require practice at the office. back to you. >> i can't imagine what that kind of training would look like. >> coming up next, safeway shares are trading higher. david faber will come back with plenty more on what it means for the sector when we come back.
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welcome back to "squawk on the street." shares of kyt th era bio, it's a way to get rid of your double chin. it says it also plans to look at the drug for possible use elsewhere in the body. >> i listened closely to that being dominic. thank you. i do want to alert our viewers who may have just joined us to shares of safeway. they were up sharply after the company put out a press release announcing it is instituting a poison pill for a year. why is the interesting part of this and why the stock is up so sharply this morning. they said they have become aware
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of a significantly amount of accumulation of common stock of the company. no word of who that might be. it is reminiscent earlier of shares of air product. in this case, while it may very well be an activist who is amassing that significant position in the shares, we're not certain who it is but it is interesting to note again that stock surveillance, stock watch does seem to be a very important duty these days for many of these corporations in trying to understand their shareholder base and who made the accumulating shares of the stocks so they can get ahead of it. we'll see what is yet to come on safeway, the company reiterating its strategic initiating plan. safeway, if you want to go way
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back, taken private back in the late 80s by akr, came back to the public markets and has been around for quite some time, operates 223 stores that are in canada and stores in the u.s. simon, over to you. >> thank you very much. >> you're very welcome. >> muni bonds not doing so well. one manager thinking they're still now a compelling investment. more on that when "squawk on the street" returns. my customers can shop around.
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begin your legacy, get an auto insurance quote. usaa. we know what it means to serve. talking about, shares of aerpostale up 16%. sycamore partners disclosing an 8% stake in the company. and the ceo of boeing's interview is coming up. >> what do wall street's top economists and experts think about where markets are headed? they're not very optimistic.
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let's get more from steve liesman, here with exclusive details. >> they're not optimistic but they've been wrong about their pessimism. let's go through where the market is right now. the 47 respondents to the cnbc fed survey. let's start off with the 10-year. you can see they've been chasing it higher all year long. the blue line is their prediction for december 2013. the green line their prediction for june. it's on the way up. 2.1% was their prediction for year end back in april. now it's up to 3. you can see 3.40 by september is where they're expecting it to be in june. let's take a look at their outlook for the s&p 500. again, they have been chasing this market higher. this number over here with 1547. they began thinking the s&p wouldnd the year at 1547. they've been wrong and wrong and wrong. 1685. i know that's not the greatest
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way to introduce this survey to people but this is what the market has really thought. so this has been really climbing a wall of worry. you can see the average is -- the change is they're looking for a decline for the rest of this year and then a 3% gain if you take it june to next year. they continue to cling to the notion that this year will be flat and next year you get a half or more growth. 2.2 is the year over year prediction and they've been steady. they thought 2013 would be a lot better than it's been. 2.7 was the number where we started. looking on to the next screen here, the recession probability is up just a little bit but still if you look in this area here, one of the lower ones we've had. go back to august 2011, 36%. and that has sort of steadily come down with a few blips up. now at 16.9%, the low of the
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series is 15.2%. as we reported earlier today, markets expect a taper from the federal reserve and a little bit bigger than i would have thought but their average is $15 billion they're looking for the fed to announce tomorrow. simon? >> i think goldman is out with 10, steve. >> that's our average. we have guys saying 25 and guys saying zero. that's how we get to 15. it's a touch higher. you saw it ticked down when we did a flash survey after the employment part in september, a little bit weaker, but it's come back up from 12.5 billion to right now 14.5 billion. >> busy 24 hours for you there, steve. in the meantime, the prices that munis taken at have taken a hit here and our next guest says you should be thinking about buying. shelly bergman is head of the
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morgan group within stanley and manages over $14 billion? assets. why should people by munis now? >> you're in a market environment where stocks have had a nice run, interest rate d are feared to be moving higher and you've had somewhat of a storm in the muni market. the average municipal bond is down 12% to 20%. you've had liquidations because of a move-up in rates, you've had liquidations because of the press and what's going on in detroit and now you've added to that some uncertainty in bonds in places like puerto rico. because of this, you're seeing managers have tremendous liquidations and because they're liquidating things in the market, where you cannot get real liquidity in some names like puerto rico and detroit that have been beaten down, they're now forced to redeem some of the higher quality
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bonds. if you could buy long-term municipal bonds and lock yourself into yields of 5, 5 1/4%, that's equivalent to 10% free tax. and long term if you study the stock market, 10% to 12% long term growth is about a bogey for what people are looking for. >> but why now? isn't the temptation that you would say, well, maybe they're going to fall more, or maybe the yields will rise to a greater extent? >> when i see asset classes down anywhere from 15 to 20% and the crowd selling, that creates sales, in some cases clearance sales. let me say this, tax rates in this country are going one way and that's up, okay? if i came up to you in the street and said let me deliver
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you a real estate investment, you got to lock up your money for 20 years, you're going to get somewhere around 10% pretax and the only thing that has to happen with that investment is people turn on the water go, through the tunnels, go over bridg bridges, really go out and do their daily types of things they do, okay, that bond will provide a stream of income which is equivalent to 10% pretax. >> here's trouble, though. this argument has been true for months now. yet people who have gotten into some of these bond funds would have lost significant amounts of money over the last month. so how do people who can benefit from everything you're talking about without worrying about near term price distortion?
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>> you have to be careful and know what you're buying. you have to do your homework. when you say "many people," i've been on the show before and if you remember over the last two, three years, i have been saying stay away from fixed income. in the last six months it's been cash or it's been equities, okay? that's changed in the last three to six months. you've had 15 to 20% price declines. and that's opportunity. once again, given the tax rates in this country and given the ability to buy quality bonds and i'm talking about top quality, not talking about airports and hospitals. >> we're running out of time. you're talking about the possibility that tax rates will rise. isn't there a possibility that cap tax relief and then you're trapped in an asset that's not going to be as tax free as you thought. >> there's talk out here but here's my own opinion and not so
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much the opinion of others. i can't see when you have an economy in a mode that the politicians are looking to go forward that the municipalities and that the government would put something in place to hinder the municipalities, which are just improving right now. >> i think the idea is they'd save $60 billion. but we have to leave it there. >> thanks for having me. >> that's shelley bergman. >> and boeing's next generation. >> that is the next dream liner. we will talk with the ceo of boeing when "squawk on the street" returns. my name is mike and i quit smoking.
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welcome back to "squawk on the street." outerwall is getting hammered today. it came out after yesterday's close and cut its quarter profits, due in part to lower demand from dvd rentals this past summer. the ceo said discount programs had a negative impact. the company will work on strategies and getting costs more in line with their growth profile. >> thanks very much. meanwhile boeing set to make the first flight of its next generation dreamliner, which will likely sell in greater
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numbers than any other 787. our own phil lebeau with an exclusive interview. phil? >> thank you, kelly. i'm joined with ray conner. that's the new 787-9. this is really entering the sweet spot on the market you believe, flight. >> yes. we have 328 orders and the airplane is really phenomenal. >> when you look at the greater range, greater capacity for carrying passengers and 40% of your future back log is going to be this plane, what new markets is this likely to open up for airlines? >> it's the real ultra long range markets for the airlines. the 787-8 is kind of the path finder that opens up the markets and this airplane with the more capacity will start to pick up as the airlines increase the loads and the traffic. >> three of the last faour year
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did you not see the substantial increase in dreamliners. you have 88 this years. >> a lot of that was driven because we didn't have a lot of capacity. we were plugged up in terms of our deliveries. now we're seeing a little more. with the 786-10, we did an awful lot of orders there at the paris air show, about 110. we're excited about that one as well. >> you have going up to ten per month is is the production rate. a, will you make it? b, when do we see you look out into next year and say let's raise that production schedule again? >> we're actually breaking rate in some of our supply chain right now and starting to increase our production to the ten a month. then we'll hold that and stabilize and figure out whether or not we want to take it up to 12 and possibly higher. >> you told me something before the interview about what your
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morning includes as far as breakdowns on every dreamliner flight around the world. >> yeah. >> what are you noticing in terms of the problems that airlines are incurring if. >> obviously we're not where we want to be. i personally get up at around 4:00 and i go through every flight and the supply team as well and we go through every flight and every issue and we have a strong master plan on when the fixes are going to come in and when we're going to get them to the airline. and we will not wait until we get -- we will not step back until we get to 100%. >> how close are you to that dispatch reliability of 100%? >> we're a little back but we're getting there. >> when you look at the global market, the economy around the world, are you noticing asia
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continues to be the pull? obviously that's the greatest growth in terms of aircraft orders. what about europe? is that coming around at all? >> where we're seeing the dip has been in the cargo market. but asia is where the big growth is. a lot of replacement orders for the european market as well as in north america, too. >> ray conner, president and ceo of boeing airplanes. big day for you. >> big day. >> the 9 is scheduled to lift off shortly after lunchtime. good weather. that's the most important thing out here. >> especially when you get up that early in the morning. phil lebeau at boeing. >> coming up, shares of apple up today but still down about 10%. when they've announced where the phones will be available,
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let's head over to the cme, check in with rig santelli on this tuesday. >> hi, carl. we're at a time right now where not only is the discussion of course about about normalization of markets and post-crisis programs and the fed. but we're also at a time where we've been lucky. we've seen some of the deficits that we racked up after the crisis coming down a little more quickly than many had anticipated. now, the sustainability -- and sustainability is, like, the most often used word in my vocabulary lately. whether it's sustainability of stocks at these levels, about the economy, about jobs, no matter what it is. but sustainability could also be viewed in another context. the congressional budget office put their long-term outlook out today. and some of the positives that i just talked about, the increase in taxes that's helping whittle down the deficits, especially as a function of gdp, especially if
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you very carefully pick your spots on where it was the worst, right around the crisis, there's been improvement. however, i want to read a quote from the director of the cboe -- i'm sorry, cbo. and that's the person douglas elmendorff, and this is what he had to say after he talked about the improvement, the fundamental budgetary challenge has hardly been addressed. now, let's put up a chart. this chart from the cbo, and i urge all viewers and listeners on satellite radio to read this report and especially look at the charts. can you see by 2038, the debt is going to take over in terms of what the total size of the u.s. economy is. so we can't be complacent here. but when you talk to many about the current issues on the continuing resolution, the debt ceiling, what we end up with is political wrangling. believe me, i understand that. maybe our constitution was set up for exactly that purpose. but in the end, there's not much
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we could do with discretionary spending. there's not much more we could do with the military percentages of the budget, think sequester. and even though it's a bumpy ride, we're better off lowering the deficit as the chart shows. and tomorrow -- tomorrow, well, you know, when you go look at the debt clock -- and i've referred to it many times -- the minute a baby is born, there's a price tag on that infant's head of over $50,000. tomorrow, i'm going to take this current report from cbo and i'm going to project it in for the next 40, 50 years to show you how much that baby will be born to on the debt side over the next several decades. the numbers are staggering. we need congress to get to work. it doesn't matter who caused it. it doesn't matter if it's a demographic issue. in the end, it needs to be addressed. otherwise, we're going to be engulfed in the quicksand of debt. kelly, back to you. >> all right, rick santelli this morning, thank you very much, rick. now, occupy wall street supporters are marking the fact that the movement began two
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[ male announcer ] it pays to double check, with state farm. welcome back to "squawk on the street." huntsman is trading at levels
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not seen since may 2011 on word it's acquiring rockwood holdings for about $1.1 billion in cash. huntsman has a market cap of nearly around $5 billion, and for its part, rockwood is trading really pretty decently to the upside. at least it's coming off there a little bit, carl. but still, one to watch for sure. >> you got that right, dom. thank you very much. hard to believe two years ago protesters started setting up camp in zuccotti park in new york city and the occupy wall street movement began. today, members of the movement are commemorating the second anniversary in lower manhattan. jackie deangelis is there this morning. jackie, good morning. >> reporter: good morning to you, carl. you can certainly see them behind me in zuccotti park. over my shoulder, in about five to ten minutes' time, they'll make their way to washington square park. it's about a 45-minute walk north of here. they've got a full schedule today on the docket. in terms of the turnout that you're looking at, you see a couple hundred people in zuccotti park. these are not the kinds of
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numbers we're used to seeing when we talk about occupy wall street, but certainly the message remains the same when you talk to the protesters who have come out. they are dissatisfied with the way business is done on wall street and the impact that has on people who live on main street. now, this took an interesting turn earlier this morning when the occupiers started rallying behind the fast-food workers who were striking last month. we followed that story very closely. those people saying that their wages were not keeping up with the rise in cost of living and they were demanding a double in the minimum wage to get by. so the occupiers now getting behind them. in the meantime, i asked one person, because the messages are a little mixed today, to try to drill down for me and give me a sense of what they are really out for. he summed it up quite nicely. >> one of the biggest issues is growing inequality and that factors into so many other things. when you see money essentially outweighs people's individual ability to vote, because, you know, i've seen the expression "one dollar, one vote," the more
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money somebody has, the more likely they can make an influence in who is making the laws. >> reporter: and part of that sentiment is shared across the country. in a recent reuters poll, it was found that 50% of the respondents found that since the financial crisis there was not enough regulation to try to prevent it from happening again. 53% of the poll respondents said they felt that -- they felt that this could happen again and, in fact, they also felt that not enough was done to prosecute the people who were responsible for the financial crisis in 2008, as well. so, carl, kelly, you guys back at the nyse, we'll be following the movement very closely, the march up to washington square park. we will let you know how it develops today. back over to you. >> jackie deangelis joining us from manhattan. of course, guys, it comes on a day when the dow is 100 points and change from a record high, and we're also getting these median household income numbers for 2012. 51 grand.
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2011, 51 grand. >> well, even worse, 1999, inflation adjusted terms, talking about 66 grand. there's no doubt we've seen a big decline in the median income, the typical income in -- >> but not for the top 0.1% or even 1%, which goes to the occupy wall street mantra. they've given ups the 99%, if nothing else. >> it comes on top of the study, the saez study from berkeley we were talking earlier about, talking about specifically that part during the recovery where the income gap has widened. a lot of people hate the comparison of the income gap with income disparity. there's all sorts of ways to -- >> you see it's the heart of the policy making. the federal reserve is doing a lot of work on this. this is not something that the wall street protesters have just woken up to t is a serious issue, and there's big brains looking at it. >> they're not far from the fed. so perhaps they can have that conversation. >> the new york fed. >> yeah. it raises your point earlier this morning about whether the next fed chief will be a robin hood of sorts trying to remedy the kinds of inequality that the
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president was talking about yesterday. >> summer wuss have been. >> exactly. maybe the prospective fed chairman tells the president what they want to hear in that regard, carl, and doesn't necessarily change direction, but it's something to consider. >> i thought sheila bear was interesting in her column today. maybe it was big to come -- >> you never know with sheila. you never know. if you are just jointing us, here's what you missed earlier on. welcome to "squawk on the street." here's what's happened so far. >> what we're allowing social media do is tap into that data and match buyers with sellers and sellers with buyers. that is ultimately a huge win. as well as being able to make the game more interesting, or the viewing experience. people watching "squawk box" can now talk. they can be a part of the conversation. you don't yell at the tv, "scott, you're nuts," they can actually tweet, "scott, you're
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nuts." >> the number up on cpi. >> oh, look at that. >> the dividend, 22%, a $40 billion buyback. >> stock's up. >> a share holder base that was very unhappy with the nokia deal. i think you need to pay attention to the value act, and what they were able to accomplish with an incredibly small percentage. >> ballmer wants the stock higher so bad. it's a desperate company, and it doesn't need to be desperate. [ bell sounds ] >> there's the opening bell. >> homebuilder sentiment was unchanged in september after a one-point downward revision. >> how much of this is a tale that the -- >> once housing begins to plateau, it's not long after we sea car sales and appliances and everything taper down. >> in the short term, the deficit is coming down rapidly. but after that, it begins to rise again as does debt held by the public.
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good morning, we're live here at post 9 at the new york stock exchange. and let's start with a check on markets this hour. the dow jones industrials average adding about 38 points at the moment. the s&p 500 sitting at 1,703, which is just about 6 points shy of its august 2nd all-time highs. shares of aeropostale are rallying after partners announced it is taking a stake in the retailer, saying it views it as an attractive investment. meantime, shares of coty slipping. its fourth quarter earnings did beat estimates but the company says it has seen a deceleration of market growth in the u.s. and europe over the past few moms. -- months. microsoft shareholders may be smiling. they're raising the dividend 22%, setting a $40 billion stock buyback. we'll look closer at microsoft to see where the stock goes from
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here. while microsoft is making news, apple is somewhat quiet. we're just days away from the new iphone release, and unlike most viewers, apple has yet to release any preorder stats. we'll tell you if no news is bad news. the dream is alive. boeing unveiling the latest version of the 787 dreamliner. we'll go live on the ground to give you an inside look in just a few moments. we start with dow component microsoft. shares are on the rise after the company announced a $40 billion buyback and a boost in its dividend. joining us now is norman young, an analyst with morningstar and ken forest, with ft. pitt capital group. it owns about 650,000 shares of microsoft. good morning to you both. >> hi. >> thanks for having me. >> kim, i want to start with you, because after the announcement that microsoft was buying nokia, the last time we had you on, you weren't all that happy about it. >> no. >> what about the news this morning? >> this is much more shareholder friendly. dividend increases really are the ultimate in repaying your shareholders, and besides that,
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it says that the company's confident that it can meet this new higher level. and, you know, as a shareholder, what's not to love about it? >> as a shareholder, wouldn't you perhaps appreciate a strategic direction that led them away, as you said, from a phone company to something more exciting in terms of its long-term growth potential? >> yes. and hopefully, we're going to get news about that on thursday at their analysts day. and the other kind of thing that's hovering out there is a new ceo. i'm sure the new ceo is going to have to have his or her own stamp on where the company goes. so those are all up in the air. but, you know, this is a step in the right direction, as a shareholder. >> norman, do you expect this to be the first of many steps with regard to boosting the payout microsoft is delivering to shareholders? >> yeah, that's a good question. they have increased the dividend the last few years. this was larger than most people expected. it's a welcomed sign, as the other guest side. >> a welcomed sign.
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here's an interesting thing, though. a lot of people have been saying, well, they've got a lot of cash locked up offshore. they could perhaps tap that, increase the dividend yield further. again, shares are up .8%. that's not a huge increase if that's really what expeople expect is coming down the pike. >> no, that's exactly right. so the problem is, they still have about $70 billion in cash, even after the nokia acquisition. most of it is offshore. and i think that probably just a little reticent. they don't want to bring the cash back, because they probably don't want to pay the repatriation taxes. this is a company that generates $24 billion in free cash flow, so it isn't that big a deal. the buyback is welcomed as well. the other share -- the other share buyback was about to expire in a couple of days anyway. these are all kind of friendly and helpful towards shareholders. again, the focus should be on the longer term competitive position of microsoft. their ability to increase the top and bottom line, and really that's all going to be about their ability to compete with the other tech giants.
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>> kim, are you rooting for value act, are you rooting for management? are you hoping they just battle it out and have investors be the beneficiaries of any disagreement? >> yeah, let me make this perfectly clear. i'm rooting for shareholders first, because we own the company. if management and if a third party can get management more aligned with shareholders, i'm all for that. again, you know, i'm not value act. so i have to really look at what -- what is being returned to shareholders. at this point, i'm happy. let's hope that, you know, value act isn't in here for a quick hit and then gone. >> all right. gets people like kim to stick around for a little while. kim and norman, thank you. after microsoft did raise its dividend, what other companies might follow in its footsteps? dominic chu has answers back at hq. >> well, carl, anytime there's a $40 billion transaction, you take notice, right, even if it's as simple as a stock buyback. but we want to take a look -- a
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real look at the other companies who have had a history of shareholder-friendly activities who might be candidates for the dividend boosts or stock buybacks. the nasdaq has a dividend achievers index, and it looks at u.s. companies that trade on either the nasdaq or nyse, and have boosted the dividend payments for the last decade. three of the stocks caught our eye. first of all, oil giant chevron, has a dividend yield of 3%. fresh off boosting its dividend in april. over 9% of the assets are in cash and they have significantly more cash than they do debt on their balance sheet. coca-cola also yielding around 3%, nearly 20% of its assets are in cash. it also has a lot of cash as a percentage of their debt. now, abbott lab, one you may not think of all the time, not yields as much as the others, but still, over a fifth of its assets are in cash, and it has a relatively low level of debt. those are three companies that have those characteristics. lots of cash, not as much debt by comparison. so on the heels of microsoft
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boosting its dividend and renewing the buyback, there are a host of other companies that could do the same, carl, if they wanted to. >> and we may play that tape, dom, if any of the companies make a move. thanks a lot. dominic chu. let's get news from brian sullivan, regarding the s.e.c. >> yeah, carl, thank you very much. the s.e.c. announcing it is basically charged 23 firms with short selling while also participating in the public stock offerings of certain firms. basically, rule m. it's against the law. you can't short sale within a five-day window, and also participating in a public stock offeroring. the s.e.c. announcing enforcement action. however, in the same release, it is also announcing it has settled with 22 of those 23 firms. some of the names out there, d.e. shaw, well-known hedge fund, the teachers plan, also on that list, g-2, private investment firm, the one firm that did not settle, as well, carl. there you go. can't short sell within a window
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while participating in the stock offering. s.e.c. saying this is part of the continued push to go after firms short selling in restricted windows. >> very interesting. thank you very much, brian sullivan. back at hq. meantime, app sl releasing a reminder that ios7 will be available tomorrow and its new products are set to roll out on friday. the company has still not released any preorder figures for the iphone 5c. the tech giant releases preorder numbers the monday after it's available for preorders, which has consumers wondering, should we be worried. alex is with jmp securities, and bilam with zulu. alex, any worry regarding the preorders? the generational shift to a new phone is a little bit different this time. >> well, sure, apple's fighting against the law of large numbers, a lot more diversity of competition right now, and i think people have figured out, they don't have to get in line for these new phones. if apple runs out, they'll build more. i think right now, you know, we
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can read something into this. there haven't been as many preorders. i think what's more important for apple is the global expansion of the story. if you'll notice with the new iphones, they are doubling the number of lte bands, more than any other phone in the market. 2x over what they had in prior iphones. that's what we're looking at. there's a big channel fill opportunity for apple out there. >> interesting. got up to five and change, now back to 458 today. just recently had one of the worst days of the year on a day where it really was a coming-out party of sorts. how much of this is deserved? >> i think investors -- >> yeah, you know -- >> sorry about that. i was saying investors have figured out, it's not about the hardware right now. what wall street is looking for, it's looking for something new with the business model. new software, new services, because i think the jig is up. android is turning this into a zero margin game. that's why jmp securities is recommending component vendors rather than apple where we're
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neutral. we like qualcomm, skyworks. so that's where we're focusing investors. >> you know, by the other story we were talking about is microsoft. i wonder, given the slowing in sales growth figures we're seeing for smartphones, is apple at risk of becoming the next microsoft here? >> you know, the thing is that with apple, it's been a different strategy. it's been focused mainly on the high end of the market. so from the growth point of view, yes, the growth (unintelligible) -- apple could see slowdown at the high end of the market. but apple has a really strong balance sheet, similar to microsoft. so we could see more balance sheet actions from apple, and made announcement on dividends and buybacks, see more of that. >> i suppose what i mean is just the way in which -- what investors can expect out of the stock, because this clearly is not a tesla, it's not a netflix. it's fallen significantly. it's paying out more of the cash than it has.
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in other words, is there any catalyst to get shares out of their current range at this point? >> yeah, i think the next iphone 6 release come, which we are hoping by middle of next year, 2014, is going to be a key catalyst. from what we're hearing, apple is testing the larger screen. that's where the high-end we could expect a much bigger product cycle, and which could -- along with that, we also expect apple to do new product category in the watch fund, or some area. with those things, we think 2014 will be a big product cycle year for apple and that could get us out of this range. >> interesting. meantime, they continue to crush it on customer satisfaction surveys. the latest numbers out of asci hammering any pc maker across the board. interesting to watch. thank you so much, guys. >> thank you. >> you are cleared for takeoff. shares of delta and u.s. airways seeing nice gains this morning. up about .7% for delta, almost
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3% for u.s. airways, and that's after being upgraded over at jpmorgan. we'll talk to the analysts behind the calls for what he sees for these airline stocks. but first, rick santelli has a look at the fomc announcement. >> we'll be talking about that, but maybe we'll wade into this summ summers-yellen issues and how some precious metals were trading late friday. a trader wasn't very happy about some of the issues. ira harris, coming up in about 20 minutes. [ bagpipes and drums playing over ] [ music transitions to rock ] make it happen with the all-new fidelity active trader pro. it's one more innovative reason
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welcome back. we're taking a look in particular at the consumer discretionary sector. right now, it is one of the best performers. dominic chu has that. >> the stocks are one of the best performing sectors, like you said. a few names to keep an eye on, abercrombie & fitch, gaining around 2%. also, garmin, and len nar, and amazon. so a very, very wide array of discretionary stocks leading the way higher. still, consumer discretionary one of the sectors to watch, because today, we have a nice move up in stocks. >> thank you very much, dominic chu back at hq. it's a sad day in washington. police are still looking for answers a day after 13 people
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were killed in a shooting at the weighing navy yard, including the gunman. eamon has a lot more. hi, eamon. >> reporter: hi, carl. that's right. we're starting to learn a little more about aaron alexis, the man who just yesterday walked into this building behind me here at the washington navy yard and killed 12 people in cold blood. he apparently had psychological issues and had been treated since august by the v.a. and the question is, how did a man who had this kind of a track record, including paranoia, he had sleep disorder, he had -- he was hearing voices in his head, how did a man with that kind of background get the security clearance that he ended up getting, that enabled him to get onto this base here? that's what led to the tragedy yesterday. 12 people dead, 13 including the shooter. today, we're hearing that there will be a moment of silence at the house of representatives at 7:00 p.m. we also saw the naval secretary and secretary of defense laying a wreath down on pennsylvania avenue, a very sad day here in
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washington, carl. >> eamon, thank you. the next generation has arrived for boeing. the company unveiling the latest version of the 787 dreamliner. stay tuned, because we'll give you a look in just a moment when "squawk on the street" continues. [ tires screech ]
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the next generation is here. no, we don't mean "star trek." boeing is celebrating the first flielt of the 787 dreamliner. phil lebeau has more on that live from everett, washington. good morning, phil. >> reporter: good morning, carl. right back there, you see the dreamliner with the blue tail, says number 9 on the tail, that is the next generation of the dreamliner. we're about two hours away from it taking its first flight today. this is the 787-9. and what that means is the next generation of the dreamliner is, it's a bigger airplane, has the capacity to carry about 40 more
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passenger, fly further. essentially, a connecting destinations further apart. now, for boeing, 40% of its dreamliner backlog now are 787-9 models. the dreamliner backlog, by the way, stands at 852 planes. more importantly, for investors, this company is on target to raise 787 production to 10 per month by the end of this year. just a few minutes ago, we had the chance to talk with boeing commercial airplanes. he says boeing is making progress, eliminating problems with the dreamliner. >> this is a very strong effort on our part as well as our suppliers' parts to fix the airplane and get it back up to dispatchable reliability. we will not wait until we -- we will step back until we get to 100%. >> reporter: and as you look at shares of boeing over the last five years, note it is at an all-time high now, greater than $115 a share. once again, guys, this flight is scheduled to happen shortly after 1:00 eastern time.
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we've been here for a number of the first flights. it's interesting to see the workers come out, along the runway. it will last about five hours. the important thing is they have good weather for the first flight. guys, back to you. >> it does look like clear skies behind you. thank you very much for that, phil. to a bullish call on the airline, jpmorgan raising it to overweight. joining us, the guy that made that call, jamie baker, airline analyst with the firm. good morning. >> good morning to you. >> thanks for your time. look, we're looking at shares higher, especially united this morning. so what's your argument for an upgrade here? >> look, we think the department of justice, you know, their position on this merger is patently misguided. we think that blocking this deal is bad for shareholders, bad for the communities that the airlines, you know, serve. but we also need to recognize that in the event of a court loss, there is likely some other alternative for the industry than just american and u.s. airways parting ways. that was part of the upgrade
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today. also, industry fundamentals are turning out to be stronger than we'd anticipated. august was a strong month and obviously the syrian overhang is less severe than it once was. yeah, both u.s. airways and delta upgraded with $26 price targets. >> right, u.s. airways i meant to say, up 3%. the others up a little 1%, or a little less. to separate the two issues, jamie, first is the industry is looking healthier. the second, are you basically saying there might still be consolidation plays here, even if this one doesn't go forward? >> well, look, there could be. but no matter how much we tell ourselves that this merger should happen, that doesn't mean that it will, which is why we wanted to weigh in, you know, with our thoughts as to what a possible plan b might look like. it's not a great plan. but we think it's better than doing nothing. it falls between the extremes of doing nothing and doing the merger. so think of it as a near beer merger substitute, but it doesn't involve a very close degree of cooperation going forward between an independent
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u.s. airways and an independent amr, and we think that that could provide, you know, value, you know, to the industry, to passengers and shareholders. >> you actually used that word, jamie, near beer. you call it a synthetic merger, a way for the guys to cooperate out of the jurisdiction of the doj. overall, i wonder, you mentioned good revenue for available seat, you talk about oil coming in a bit. should we expect third quarter numbers to be okay? >> yeah, i think so. as a matter of fact, airlines tend to be disclosive -- not an actual word, but it should be -- they will release -- yeah, it is now -- they will tend to tighten up the guidance as the end of the month approaches, and we have high confidence that the majority of air lines will guide up and that we'll see third quarter consensus firm up from here. delta, in particular. out there currently with an 11%
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to 13% operating margin target for the third quarter. we think they strengthen that to a 12% to 14% outlook. we don't think this is manifest in current share prices. >> having travelled for a reunion, the topic of conversation was how expensive it was for everyone's airfare. is there prospect of fare relief or have airlines decided to keep the fares at or above current levels? >> can you find somebody that's willing to complain about a recent ticket purchase. you can find somebody who thinks they got a great deal, on an adjusted inflation basis, we don't think it's been cheaper than this. you can have sticker shock, i suppose. but it continues to be tremendous value for passengers in our opinion. that's one reason we think the doj position is simply misguided from the start. >> wow, all right. jamie, thank you very much for the perspective. again, we keep an eye on share
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which are helping markets. bells are about to sound across europe. a couple minutes left across the pond. ever ybody has different investment objectives, ever ideas, goals, appetite for risk. you can't say 'one size fits all'. it doesn't. that's crazy. we're all totally different. ishares core. etf building blocks for your personalized portfolio. find out why 9 out of 10 large professional investors choose ishares for their etfs. ishares by blackrock. call 1-800-ishares for a prospectus, which includes investment objectives, risks, charges and expenses. read and consider it carefully before investing. risk includes possible loss of principal.
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simon hobbs is here with a look at what's happening across the pond.
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>> -- slightly lower, off the five-year high in europe. the interesting thing is the money -- the big money -- continues to flow into europe. we've had the giant merrill lynch fund manager survey come out today. basically, fund managers are controlling -- >> announcer: european markets are closing now. >> -- doubled overweight in europe, to nearly 36%, in just one month. so the big money continues to move into europe, and that's the picture i want you to take away, if anything, from this particular hit here now. so we're back down from the five-year highs. the automotives have weighed on the european markets today. we've got some data out from those that do the car registrations in europe, and i'm afraid new car registrations are down 5% year on year. so some of the autos are lower. i did think importantly i would be able to show you a video message from berlusconi saying
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he was not going to bring down the italian government. that's what we thought he was going to release some hours ago. he has not. we don't know exactly why. but the new piece of information we have today is that now another court has decided to fine one of his investment vehicles $720 million for the way in which they attempted to take over a publisher. the plot thickens. you may get the senate vote tomorrow to knock him out of the senate, and there was supposed to be a second video release saying, hey, i'll form my own party again. we'll wait and see what happens there. before i let you go, pictures of prince harry, one of the heirs to the british throne, in a freezer overnight. you may be aware that prince harry -- yes, this is a freezer. this is fake wind they're trying to get to blow harder at them. they're going on a big veteran race with wounded veterans across the south pole. he's preparing in this freezer overnight with 45-degree winds,
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31 degrees -- minus 31-degree fahrenheit temperatures, to prove that they can cook, eat, live -- >> i'm not sure i'd want to spend more times than i had to in that veteran. he's tough. >> he is tough. >> a single woman with hence harry? come on! well, yeah, well, i won't add any comment to that one. >> fair enough. thanks, simon. let's get to rick santelli with a look at what the future -- or, rather, wednesday may hold for the fed. hey, rick. >> absolutely. let's start out with that and let's digress a little bit. so what do you think the fed meeting is going to bring? are they going to impede normalization? are they going to stick to crisis management? >> i think they're going to taper. it will be in the treasury, which they can, because again the debt -- i know you were talking about the cbo numbers, and the -- the cbo prognostications are off so many times, so who would give them any -- >> yeah, you know, having said that, they're a bit worried
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about it. because they acknowledge whether it's through, you know, forces of our economy by itself, through some of the programs, some of them did do some good. >> yeah, yeah. >> we are moving ahead with respect to percentage of debt-to-gdp, but the long-term outlook even scares the cbo. you can see it in that report. >> well now -- >> well, you can't stop there. because once interest rates quote/unquote normalize, to use the parlance of the profession, then the cost of the u.s. primary deficit is going to dive dramatically. >> well, you can't say -- >> oh, i'm sorry. >> you can't take the clothes off the emperor. my main reason three years ago i didn't like this is because the program, in my opinion, is truly about making the treasury affordability factor and services the debt. he wasn't a happy camper on friday. you saw gold and silver rally a little bit, and you called me up. you said, peace par chilten's number? explain. >> i was sitting there and watching the market, the gold
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market, silver market, which is the cash market in the u.s., doesn't close until 5:15 new york time, 4:15 chicago time. those markets rallied substantially for the last two hours. >> i'm listening. how does par chilten -- >> because i'm looking around for all of the news, there must be syria, must be something that's pushing -- because it was substantial -- gold rallied almost $25 in the last two hours. silver 50 cents. i'm going, okay, of course, sunday, we find out that larry summers has -- >> now i see -- so you think something nefarious was going on -- somebody had the word early? >> hey, 535 votes -- people who sit in that house of congress may have known, who knows. and don't forget, they can trade. don't forget, they never forbid -- >> they defanged that legislation. >> so we look at stocks. why isn't somebody looking at the futures markets to see who is buying the gold and silver, because the rally came out of no whereby. >> because they're not interested in the votes of the people trading gold and silver
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maybe. all right. the final chapter. you would have rather had summers still in the game. but i like the way you put the superficial battle in perspective, in the last 20 seconds, tell us. >> to me, the summers game -- i didn't think we'd see summers. i never did -- because this is a battle main street versus wall street. wall street wanted summers, because they're more comfortable with summers and they can speak to him about the massive regulation that is coming -- >> versus -- >> versus not having -- >> basically, elizabeth warren figures him -- >> this was a tremendous battle, and warren is all about -- i'm not saying she's wrong. but this was hutch regulation wall street is going to have to field going forward. >> we have to wrap. you don't read the balloons if they fly above you and float up the news stories, huh? thanks, ira harris. guys and gal, back to you. >> all right. thank you so much, rick santelli. bob pisani here at post 9,
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taking notes, developing a thesis? >> sex points from a historic high, 1,703. knocking on the door. people are puzzled by the economy and the fact we don't have a stock market to support the economic numbers. so here's what drives everybody crazy. let me just show you there and how we'll explain it away. we have growth at still too weak. unemployment still too high. and yet, in 2013, we've had a rally with no correction. it's been essentially straight up. 19% year-to-date. anything close to a correction, 5%, from june, when we were concerned about the taper. i do a web piece with art cashin. he's been using a great phrase to explain this conundrum. he calls it the rationality put. this is what he is using to explain -- put up art cashin -- why the market activity has been the way it is. traders believe everything has worked out all of the potential blowups have not happened, therefore they believe in the feuer. all of the other blowups will work out, as well. we had the potential blowup with syria. it didn't blow up.
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it worked out. we had potential blowup with summers getting difficult. but that didn't happen either. now traders believe right now that the taper is going to happen. it's going to be quiet, in line with the expectations. there's not going to be any blowup, and the debt ceiling, the next thing looming october 1st, also likely will not blow up. we don't know if that won't happen. that explains why we've got the market working this way. but people believe everything is going to work out. as for the s&p 500, there you go. look. 19% up. and let me tell you something. muddling along like we've had in this economy, it may be the best thing for the s&p. you get stocks -- you get the economy blowing up. you get dislocations, you get bubbles, you get the economy going down. you have problems. muddling along may not be bad for the u.s. economy. let me move on and talk about homebuilders. you'll notice they are rebounding again today. we've seen interest rates come down the last few weeks. we've seen things a little better. the home building sentiment numbers today, i want to point out, they are not collapsing. put up what actually happened. they break them down in different ways. but even though there's been
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concerns about sales slowing down, present sales, expectations, were unchanged. future sales expectations down a little bit, but still growth and prospective buys were up. this is not a sign of a collapse in home building. i agree there's dislocation between home sales and between starts, and what's been going on here. there is no collapse. finally, i want to point out the big market movers other than homebuilders, take a look. new highs, boeing, raytheon, northrup, hitting historic highs. general dynamics at a five-year high. you might say despite the concerns with the sequester and with what's going on with the defense budgets, the commercial aerospace business is still on fire. >> you got that right. >> historic highs. the only sector where every major stock is sitting right at a historic high. >> thanks, bob. bob pisani. a lot of conversation over the past few weeks centered on the next person to head the federal reserve. but while everyone is looking ahead, how is the current fed chairman done? we'll look at cnbc's exclusive fed survey to give ben bernanke a grade in a moment.
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paying dividends. microsoft ups its dividends in a buyback today. we'll see who could be next. and special delivery. two traders trade off against fedex ahead of its big report tomorrow. you'll decide the winner, as well. we'll see you in about 15 minutes. >> all right, scott, sounds great. thank you very much. ben bernanke's term is expected to come to an end soon. how would you grade his term? steve liesman is back at headquarters with some results from the fed survey. steve? >> thanks, kel. we asked the top economists, strategists and wall street money managers how you would grade ben bernanke at the end of -- or coming to the end of his eight-year term. what's interesting, as you'll find here, as you'll see here, it's remarkably consistent. here are the results from the survey we did conducted thursday and friday. 48% of our 47 respondents giving him a b. 30% an a, 18% a c. a few, 4%, a d and an f. what you'll see in a second is how this is really a divided grade, from the beginning of the
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crisis till now. and now, look at this. this is amazing to me. we've asked this question over the past four years and the percentages are remarkably consistent, even while the players in the survey have changed. they keep giving 48% a b. a little bit better this time, but generally 26% and 18%, a c. and looking at the commentary, what people wrote in. what you'll see is they said ultimately it's really how he did at the beginning of the crisis and how he did at the end. john riding said from rdq, if we can go to the next one. if we can't, i'll read -- there we are. it's a c. an a for the handling of the crisis, but a d otherwise. we'll come back to that in a second. larry mcmillan says he's giving him a d. this will be his grade in retrospect when the full effect of his policies become known. and then, some supported him. diane swann said serendipity that he got the job, deserves credit for saving the credit markets from themselves. finally, looking at hank smith from haverford investments, he
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wrote in, what was the alternative? let's take a quick look at the record here, what we're going to see is that bernanke term beginning in '06. here is the unemployment rate on the left-hand side. and he came in, came down, and spiked up in the crisis. and it's been coming down very slowly, more slowly than he or anyone would like. overlay the gdp record on this thing. there's the big crisis swoon. and then coming back not too bad, but again, subpar for this kind of decline that we had. finally, where is the unfinished business? a single chart shows you the unfinished business. here's the fed's balance sheet. about $800 billion when he came into office. and then through successive qes, began ramping it up. why he gets low marks from some people and/or incomplete from others is because we're still here and not down here somewh e somewhere. the exit -- the process of raising the balance sheet, bringing it down -- is incomplete. so that's why a lot of people give him a "d."
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"a" for the beginning but d or c for where they are. >> a great series of charts. puts the whole tenure in perspective. thank you, steve. steve liesman back at hq. of course, a particularly important meeting for the fomc begins today. the fed is expected to decide how much to taper the bond-buying program. joining us with insight, is two former federal reserve governorers, robert heller. >> and, again, we can handle the successor issue but also the taper. let's start with the taper, mark. a lot of conventional wisdom keeps toing around the $10 billion, $15 billion number. does it make sense to you? >> it makes sense to me. the important thing is we're going to actually fix the -- have something certain on the taper and the fact that there is a taper. i think that the markets are looking for a date certain, while i think the members of the fomc are more focused on the economy and they'll let that be the judge. the number sounds about right. >> robert, is it the economy or is financial stability becoming more important? and i ask that, because a couple
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of facts just this morning, bob pisani pointing out we haven't had a correction all year, stocks never dipped below the year-end level. we haven't had a 10% correction in almost two years. do you think that's entering into the calculus here? >> well, i think the fed has to be very careful that they're not creating a bubble economy. and they've got to be mindful, also, of early next year when the fed board will radically change. four new governors will be on the federal reserve board come february 1st. and so, they've got to set up for this transition. a period during which the fed is probably not going to act very actively. >> interesting. mark, obviously, janet yellen is apparently anointed by the media as the top favorite of the journal today calling her the top hopeful. someone just points out she has never dissented with bernanke. 36 for 36. is she the one? >> well, i think, carl, my own
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sense is that today there's -- there's a sense of real calm among the fomc members, because if the two names that are still alive are the two correct names, don cohn and janet yellen, there will be a great comfort level within the fomc members with either one. it reminds me a little bit back about eight years ago, a change from alan greenspan and the candidates were bernanke, cohn and feldstein. people were comfortable with the choices, and that's my sense today, too. >> what if the president wants to do something bold, looks at bernanke, yellen, and says, i want to take a different course, i'm worried about the wealth gap, and goes with someone out of left field, like a sheila bear. >> i think it will be a great mistake. the fed needs to be the center of stability for the economy. there's got so be some certainty here, so that everybody at the tiller that will keep a steady
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course. and that will be -- be provided both by yellen and cohn like mark just said. >> mark, you mentioned the sense of calm among fed members. does that extend to even the hawks? i mean, is that what a laggard is saying, looking at the prospects of a yellen chairmanship? >> i would sense in terms of the leadership and their collaborative way of doing business, i would think so. you will still see some dissent among the president, either kansas city or richmond, but i think in general, what we're doing is exactly what steve liesman just pointed out. the next phase is the tapering off and the winddown, and that won't be an easy thing to do, and it's going to require a lot of leadership. >> mark, just a quick question. is there any precedent or any possibility for a ben bernanke, for example, to stay on for another 12 months? >> there is -- there is plenty of precedent, and some -- but i think minimal possibility. i think if that were the case, we would have seen the signal of it right now. but the precedent is still there.
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his term as governor has not expired. it's his term as chairmanship that will expire in january. >> robert, morgan stanley, today -- or yesterday said, quote, the longer the president delays the easy choice -- by that, they mean yellen -- the more clearly he shows his reluctance to do so. i just wonder how much you think the politics -- the interbranch politics between the executive office and the senate is playing with something that is potentially dangerous, namely the politicization of the fed? >> well, it is the obama fed now. there are no bush appointees left. he has the clean sweep of the federal reserve board, and as i said earlier, he has the chance now to appoint several new people. so he has to bring further stability into the system and not rock the boat. rocking the federal reserve boat, i mean, just will be foolishness. >> well, i think bob's -- i think bob's point there is critical. it's the stability.
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it's critical. and the thing they'll be looking to. to go out on a limb with a choice at this point, you look at the way that even the larry summers potential candidacy rocked the markets. imagine if it was somebody out of left field. and also remember the last president to have selected a non-macro economist, as the fed chairman, was jimmy carter, and he had to turn that around 18 months later. >> all right. that's a good point, mark. ly stand down for the time being. mark olson and robert heller, both with analysis on what to expect tomorrow and in the months ahead. coming back, we should say from the brink, we have come a long way since the start of the financial crisis five years ago, but there are new warning signs in the housing market that investors should be a little worried about. we'll explain when we return. ♪ norfolk southern what's your function? ♪ hooking up the country helping business run ♪ ♪ trains! they haul everything, safely and on time. ♪ tracks! they connect the factories built along the lines.
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herbalife hit a record high in trading earlier today. they're up around 3%-ish. they did get as high as $73.75. it comes on a call by an analyst who thinks herbalife could begin an aggressive buyback plan in the coming weeks. many are saying it's getting a boost as sellers cover the short positions. remember, bill ackman has a high profile short bet, getting hurt
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by the record highs. over to you, kelly. >> dom, thank you very much for that. it's hard to believe it's been five years since the financial crisis. the housing market crashing right at the height of the crisis, and five years later, the question now, of course, is whether it can happen all over again. diana olick has that story for us now out of washington. hi, diana. >> reporter: hey, kelly. and to answer that question, we have to look at what has changed since then. and two things top the list. first, under dodd-frank financial reform is the new ability to repay rule. a lender must make a good-faith effort to determine if the borrower can pay the loan back. sounds silly, but that was, in fact, what got lost in the bubble frenzy and what fundamentally caused the mortgage crash. next is what's called the qualified mortgage. in order for a lender to be able to sell the loan to fannie and freddie, and get legal protection from recourse, it must meet several standards including that a borrower pay no more than 43% of income on the debt. the loan also cannot have certain risky features that were popular in the last decade.
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>> i think we've gone full circle back to having the customer at the center of the ability to repay, making sure they can have sustainable homeownership rather than necessarily having products that investors will buy that may not make sense for the customer, which is where we were in 2006, 2007 as an industry. >> but investors are already looking at the market outside of qm. qm is only required if you want to sell the loan to fannie and freddie. there are plenty of borrowers who fall outside. one of the architects of qm left to start a business serving those borrowers. he claims it'll be a safer product, because lenders will have skin in the game. >> non-qms are the only place, if you want to make decisions and bear the risk and reward of them, where you can count on actually getting paid for taking good risks, you have to be non-qms, and that's where we are. >> and it'll also be more
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lucrative because the lender also charge more for taking on -- higher the reward, the higher the risk will rise, which is what got us in trouble in the first place. for more, go online to the realty check. >> all right, thank you so much, diana olick in washington. golf fans and residents of farmingdale, new york, have something to celebrate. we'll explain after a break. woman: everyone in the nicu -- all the nurses wanted to watch him when he was there 118 days. everything that you thought was important to you changes in light of having a child that needs you every moment.
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to treat my low testosterone, i did my research. my doctor and i went with axiron, the only underarm low t treatment. axiron can restore t levels to normal in about 2 weeks in most men. axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. women, especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. report these symptoms to your doctor. tell your doctor about all medical conditions and medications. serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. ask your doctor about the only underarm low t treatment, axiron.
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pg of america has announced the black page golf course will host the 101st pga championship in 2019 and the 45th ryder cup in 2024. just a little ways off. bethpage has twice hosted the majors in the past years, the usga holding the u.s. open in both '09 and '02 when it became the first venue to do so. it's one of the five courses there in farmingdale, new york. congratulations to them. >> you ever played out there? >> no, i don't really play. you? >> no, neither. >> i'm sure it will be great to watch, though, if you can wait that long. it's a few years off. meantime, the s&p, giovanni, one of our producers points out, best first three quarters since
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1997. 19.4%. >> 19.4%? that's exactly what we were talking about, the fact we've not had a correction, a 10% drop, in over two years. >> unbelievable. the dow is up 45. let's get back to headquarters, scott wapner and "the halftime." carl, thank you so much. welcome to "the halftime" show. four hours to go until the close. let's go to the wall and see where we stand on the street at the lunch hour. dow up 45. s&p, nasdaq in the green as well. here's what we're following on "the half." microsoft's move. what does a big dividend hike and buyback mean for the rest of big tech? who could be next to pay up? special delivery. after a 20% run, should you buy or fade fedex? ahead, a street fight handled with care is ahead. first, the top story. it is crunch time for the rally. stocks are up again today on pace for their best september in three years.

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